Zillow hit with lawsuit over 'anticompetitive' home listing rule

MANHATTAN (CN) — Real estate brokerage firm Compass sued Zillow on Monday for refusing to allow private home listings on its website, accusing the real estate marketplace of gatekeeping and anticompetitive tactics.

When users request a tour on Zillow, rather than putting them in touch with the property’s listing agent — who wouldn’t charge commission — the site directs them to a Zillow-affiliated “buyer agent” who does charge such a fee. Zillow then collects up to 40%, Compass complains.

“Zillow is extracting anticompetitive rents. They put a toll booth on a road that otherwise worked fine, adding friction and cost to the process because the money goes to them,” Compass, which has a market cap of $56.6 billion and touts itself as the country’s largest independent real estate brokerage, says in the 60-page federal lawsuit.

Compass points out that nearly every house for sale in the U.S. is indexed on Zillow, which has become homebuyers’ first search since the site has bought up competitors. The online marketplace has a market cap of about $16.6 billion.

To protect its throne, Compass says, Zillow conspired with at least two competitors, Redfin and eXp Realty, to instate what it calls the “Zillow ban.”

“Simply stated, the Zillow ban mandates that if a home seller and her agent market a home off Zillow for more than one day, then Zillow and its allies will ban that listing from their search platforms, making the home invisible for many buyers,” Compass says in its lawsuit.

Compass accuses Zillow of using the ban to steer home listings toward its own platform, dampening competition and limiting homeowners’ choice in violation of the Sherman Act.

“In a free and competitive market, competitors’ products and strategies should rise and fall on merit — not the whims of a monopolist gatekeeper like Zillow,” Compass writes.

In an emailed statement, a Zillow spokesperson said the company seeks to create a level playing field in the housing market by blocking private listings that haven’t been posted to the multiple listing service, a database of properties for sale in a region.

Zillow says its policies ensure that for-sale listings are posted to the service, then published on Zillow and other sites that pull from that database’s feeds.

“At the heart of this issue is a simple principle: when a listing is publicly marketed, it should be accessible to all buyers — across all platforms, including Zillow. Hiding listings creates a fragmented market, limits consumer choice and creates barriers to homeownership, which is bad for buyers, sellers, and the industry at large, especially in this inventory and affordability-constrained environment,” Zillow said, pointing to an announcement on its website explaining the policy’s roots in National Association of Realtors standards.

“Zillow believes the claims in this lawsuit are unfounded and will vigorously defend against them," the company said.

Compass is asking the Southern District of New York to block the “Zillow ban” in the midst of a hotly competitive housing market.

Elevated mortgage rates and rising prices have discouraged prospective homebuyers during what is traditionally the market’s busiest time of the year.

In April, the U.S. housing market had nearly 34% more sellers than buyers shopping for a home, according to an analysis by Redfin. Aside from the economic standstill at the height of the pandemic, homebuyers haven’t been so scarce since at least 2013.

Sales in March and April notched the slowest pace for those months since 2009, the wake of the housing crisis, according to the National Association of Realtors.

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